Telekom Austria AG, one of two European phone companies partly owned by Carlos Slim’s America Movil SAB, rose the most in three months after fourth-quarter domestic revenue declined by less than analysts expected.

The stock rose 4.1 percent, the most since November, to 5.06 euros in Vienna. Fourth-quarter revenue from Austria fell 4.1 percent to 721 million euros ($943 million). Telekom Austria’s fourth-quarter net loss narrowed to 76.3 million euros from a loss of 321.5 million euros a year earlier.

“Austria did not come in as badly as we expected,” said Bernd Maurer, an analyst at Raiffeisen Centrobank in Vienna. The Austrian division showed margins that exceeded forecasts and better revenue on data and equipment, he said.

Revenue fell 2.8 percent in 2012 and analysts expect it to decline further this year even as the number of mobile operators in the home market is shrinking from four to three. The company is grappling with a shrinking domestic market for fixed-line services as well as tougher competition and regulatory cuts to lower mobile termination and roaming rates.

For years, four mobile operators have battled for an Austrian population of about 8 million. Telekom Austria expects competition to remain fierce even after Hutchison Whampoa Ltd. took over Orange Austria.

“Austria has three mobile operators; so does China,” Chief Executive Officer Hannes Ametsreiter said at a press conference today.

Declining Prices

Average revenue per user in the company’s Austrian wireless segments shrank 8.7 percent to 17.5 euros last year. All-inclusive contracts are available for as little as 7 euros a month in the country, causing many people to give up their fixed line. After shrinking for 15 years, revenue in Telekom Austria’s domestic fixed-line segment grew by 0.2 percent last year on the sale of bundled products, Ametsreiter said.

Telekom Austria is also preparing for more investment in Austria, where wireless spectrum auctions are due later his year. The phone operator is facing a period of heavy investment “just as operational momentum is worsening,” Usman Ghazi, an analyst at Berenberg Bank, wrote in a note to clients this week. Telekom Austria may spend 350 million euros on Austrian spectrum, he said. Auctions in several of the company’s eastern European markets are scheduled between 2014 and 2017.

Revenue in Austria and Bulgaria fell “due to intense competition and regulatory effects,” the company said in a statement. “Business performance was negatively impacted by regulatory measures on both the domestic and foreign markets, mainly applying to mobile termination rates and roaming tariffs.”

Regulatory Pressure

European regulators have been limiting the prices phone companies can charge for roaming. Ametsreiter said that earnings before interest, taxes, depreciation and amortization generated from roaming have declined by 131 million euros between 2007 and 2012. He expects them to shrink another 41 percent until 2016.

The company reiterated a revenue forecast for this year of about 4.1 billion euros and investment of about 700 million euros, excluding what it plans to spend on spectrum.

Chief Financial Officer Hans Tschuden didn’t disclose how much the company has set aside for the auction, saying he didn’t want to give competitors an advantage.

Telekom Austria has enough credit lines for the investment and might also tap the bond market, he said. “Our investment-grade rating guarantees us access at any time,” Tschuden said. The company is rated BBB by Standard & Poor’s.